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U.S. natgas futures fall 3% on forecasts for less cold than expected

Dec 2 (Reuters) - U.S. natural gas futures fell about 3% to a two-week low on Friday on forecasts for less cold weather and lower demand over the next two weeks than previously expected. That milder weather should allow utilities to leave more gas in storage. Gas stockpiles were currently about 2.4% below the five-year (2017-2021) average for this time of year. Another factor weighing on prices this week has been efforts by the U.S. government to reduce the risk of a railroad worker strike. A rail strike would have cut coal deliveries to power plants, forcing generators to burn more gas to produce electricity. U.S. President Joe Biden is set to sign railroad-related legislation that will block a rail strike that could have wrecked the nation's economy. Energy traders said the biggest uncertainty that could boost gas prices was whether Freeport LNG would meet its target to restart the 2.1 billion cubic-feet-per-day (bcfd) liquefied natural gas (LNG) export plant in Texas in mid- December and reach full capacity in March. The plant shut on June 8 due to an explosion caused by inadequate operating and testing procedures, human error and fatigue, according to a report by consultants hired by the company to review the incident and propose corrective actions. Freeport LNG, however, has not yet submitted a request to restart the plant to the U.S. Department of Transportation's Pipeline and Hazardous Materials Safety Administration (PHMSA), sources familiar with the company's filings have told Reuters. A few ships have been waiting - some for weeks - in the Gulf of Mexico to pick up LNG from Freeport, including Prism Brilliance, Prism Diversity and Prism Courage, according to shipping data from Refinitiv. Front-month gas futures for January delivery on the New York Mercantile Exchange fell 22.7 cents, or 3.4%, to $6.511 per million British thermal units (mmBtu) at 9:48 a.m. EST (1448 GMT), putting the contract on track for its lowest close since Nov. 18. That also put the contract on track to decline about 7% for the week after rising about 19% during the prior two weeks. In the spot market, meanwhile, gas prices in California have soared about 125% over the past two weeks as freezing weather blankets parts of the state. In the north, the PG&E citygate hit its highest level since February 2014, while in the south, next-day gas at the Southern California Border rose to its highest level since September 2021 for a second day in a row. U.S. gas futures are up about 75% so far this year as much higher global prices feed demand for U.S. exports due to supply disruptions and sanctions linked to Russia's invasion of Ukraine. Gas was trading at $42 per mmBtu at the Dutch Title Transfer Facility (TTF) in Europe and $34 at the Japan Korea Marker (JKM) in Asia. That was an 8% drop for the European benchmark as some traders took profits following gains of 10% per week over the past three weeks. Data provider Refinitiv said average gas output in the U.S. Lower 48 states rose to a monthly record of 99.5 bcfd in November, up from 99.2 bcfd in October. With colder weather coming, Refinitiv projected average U.S. gas demand, including exports, would jump from 115.7 bcfd this week to 121.4 bcfd next week and 129.4 bcfd in two weeks. The forecast for next week was lower than Refinitiv's outlook on Thursday. The average amount of gas flowing to U.S. LNG export plants jumped to 12.7 bcfd so far in December, up from 11.8 bcfd in November. Although it is still early in the month, that is just shy of the monthly record of 12.9 bcfd in March despite the ongoing outage at Freeport. Week ended Week ended Year ago Five-year Dec 2 Nov 25 Dec 2 average (Forecast) (Actual) Dec 2 U.S. weekly natgas storage change (bcf): -40 -81 -59 -49 U.S. total natgas in storage (bcf): 3,443 3,483 3,513 3,520 U.S. total storage versus 5-year average -2.2% -2.4% Global Gas Benchmark Futures ($ per mmBtu) Current Day Prior Day This Month Prior Year Five Year Last Year Average Average 2021 (2017-2021) Henry Hub 6.72 6.74 3.86 3.73 2.89 Title Transfer Facility (TTF) 42.27 45.64 37.67 16.04 7.49 Japan Korea Marker (JKM) 33.78 30.31 37.84 18.00 8.95 Refinitiv Heating (HDD), Cooling (CDD) and Total (TDD) Degree Days Two-Week Total Forecast Current Day Prior Day Prior Year 10-Year 30-Year Norm Norm U.S. GFS HDDs 380 394 305 347 378 U.S. GFS CDDs 8 7 8 6 5 U.S. GFS TDDs 388 401 313 353 383 Refinitiv U.S. Weekly GFS Supply and Demand Forecasts Prior Week Current Week Next Week This Week Five-Year Last Year Average For Month U.S. Supply (bcfd) U.S. Lower 48 Dry Production 100.1 100.1 99.9 96.3 89.8 U.S. Imports from Canada 9.1 8.5 8.8 9.5 8.9 U.S. LNG Imports 0.0 0.0 0.0 0.0 0.3 Total U.S. Supply 109.2 108.6 108.7 105.8 99.0 U.S. Demand (bcfd) U.S. Exports to Canada 3.3 3.4 3.5 3.4 3.2 U.S. Exports to Mexico 5.3 5.6 5.6 5.8 5.0 U.S. LNG Exports 12.0 11.8 12.5 11.8 6.9 U.S. Commercial 15.4 13.6 14.5 12.7 14.6 U.S. Residential 25.3 22.1 23.9 19.5 24.6 U.S. Power Plant 31.4 27.1 29.2 28.5 27.3 U.S. Industrial 25.3 24.3 24.5 23.5 24.9 U.S. Plant Fuel 4.9 4.9 4.9 5.0 4.9 U.S. Pipe Distribution 2.8 2.5 2.7 2.5 2.5 U.S. Vehicle Fuel 0.1 0.1 0.1 0.1 0.1 Total U.S. Consumption 105.2 94.7 99.8 91.8 98.9 Total U.S. Demand 125.8 115.7 121.4 112.8 114.0 U.S. weekly power generation percent by fuel - EIA Week ended Week ended Week ended Week ended Week ended Dec 2 Nov 25 Nov 18 Nov 11 Nov 4 Wind 14 9 9 15 12 Solar 2 2 3 3 3 Hydro 6 6 7 6 5 Other 2 2 2 3 2 Petroleum 0 0 0 0 0 Natural Gas 34 39 41 38 39 Coal 19 20 18 16 18 Nuclear 22 20 20 20 20 SNL U.S. Natural Gas Next-Day Prices ($ per mmBtu) Hub Current Day Prior Day Henry Hub 6.33 7.00 Transco Z6 New York 5.68 6.80 PG&E Citygate 19.64 16.84 Dominion South 5.20 5.74 Chicago Citygate 5.57 5.93 Algonquin Citygate 6.17 10.00 SoCal Citygate 19.05 18.65 Waha Hub 4.88 5.19 AECO 5.07 5.52 SNL U.S. Power Next-Day Prices ($ per megawatt-hour) Hub Current Day Prior Day New England 73.75 94.75 PJM West 56.50 73.25 Ercot North 38.25 47.75 Mid C 195.50 190.00 Palo Verde 150.25 134.08 SP-15 182.25 168.50 (Reporting by Scott DiSavino in New York Editing by Matthew Lewis)